Monthly Archives: June 2015

The UK Electricity Industry

From the CEGB: The Central Electricity Generating Board under the stewardship of Lord Marshall, today, the UK has a very fragmented market.

Electricity demand is about 350 Tera Watt hours = 350TW/h of demand per year. This is broken down into 7 large groups who use the energy, who are:

The Energy Industry
Industrial Use
Public Sector

Interesting fact that the energy sector uses 25TW/h (7% of total power), but then when one thinks of Hydroelectric, huge quantities of electricity is needed to pump water into the higher lake after the power station has produced the power. Or other sectors like oil refineries use massive amounts of power too, so that 7% figure is easy to comprehend.

There are about 9 fuel type sectors that make up the power:

Oil Biomass
Natural Gas (Combined Cycle Gas Turbines)
Liquid Natural Gas (Gas Turbine and Open Cycle Gas Turbine (GT and OCGT))

The UK is very unusual in terms of the large amount of international ownership in the industry.
We have E.ON & RWE npower are German companies, then we have EDF Energy which is a subsidiary of Electricité de France and Scottish Power is part of the Spanish company Iberdrola.
The UK has only a few UK owned companies, Centrica (British Gas), Drax Power and Scottish & Southern Electric to name just 3 of the largest.

Who are the UK generators that feed The National Grid:-

RWE npower
Scottish & Southern
Scottish Power
GDF Suez
EDF Energy
Drax Power
Immingham CHP (Conoco Phillips)
Macquarie Investment Funds (Baglan Bay and Sutton Bridge)

A very interesting sector, and if you want more information talk to Tom Martin !!

Nigerian Oil

Nigeria, the largest economy in Africa. It is country of great diversity and culture. Its oil reserves are huge.

From the BP Statistical Review of World Energy:-


One can see Nigeria’s oil wealth. It has 37.1 thousand million barrels of oil in its proven reserves.

What is that worth ?

One Barrel of oil is today worth $63.05 = £40.11

So 37,100,000,000 barrels x £40.11 = £1,488,081,000,000

That is a large number, = £1,488 Biion = £1.48 trillion, that is equivalent to the whole of UK’s annual GDP.

The Size of the US Federal Reserve Balance Sheet

The United States Central Bank is known as the US Federal Reserve, often called the US Fed.


Since the onset of the Global Financial Crisis, the a little reported fact in the main stream media is the growth in the size of the Federal Reserve Balance Sheet.
This has been driven by the bailouts, the Federal Reserve buying securities such as mortgage back securities and of course quantative easing, buying US Treasury T-Bonds


By reading page 12 here:


One can immediately see the size of the US Federal Reserve Balance Sheet.

A more up to date version is here:-


Yes, total assets of $4,451,663 MILLION.

That is NOT a typo, that is $4,451 Billion = $4.451 Trillion

The US Annual GDP is about £16.77 trillion

Thus the US Federal Reserve Balance Sheet Assets = 26% of US GDP.

The Allianz Technology Trust.

The Allianz Technology Trust PLC is a UK-listed investment trust that aims to achieve long-term capital growth for its shareholders by investing in technology stocks worldwide.

Its Top 10 holdings are:-

7.9% in Microsoft
5.2% in Palo Alto Networks
5.0% in Apple
4.3% in Amazon
4.1% in Splunk
4.0% in ServiceNow
2.9% in Visa
2.9% in Netflix
2.5% in Western Digital
2.3% in SunPower

This gives a total investment of 41.1% in these 10 firms.


Interesting to see the share price of about £6.20 and the assets have a total value of £6.47 per share. This means the fund is trading at a discount. Or another way of look at it, is that you can buy assets worth 647p for only £620p.

RBS Today vs RBS 2008

HM Government has now signalled the sale of its majority stake in The Royal Bank of Scotland plc. The UK Tax payer owns over 80% of the bank, via the state investment company UK Financial Investments.

In 2008, as the height of the financial crisis, the UK government had to immediately pump in £45bn to keep the bank afloat.

The RBS balance sheet in 2008 was:-

Total assets £2,401,652m
Yes, £2,401 billion = £2.4 Trillion. That was larger than the UK GDP in 2008.

The RBS balance sheet in 2014 was:-

Total assets £1,050,763m
Yes, £1.050 billion = £1.05 Trillion.

One can see in the 7 years since the financial crisis that RBS balance sheet has more than halved, via all the disposals that have taken place.

The Woodford Patient Capital Trust

The Woodford Patient Capital Trust is the latest investment trust launched by Neil Woodford, the revered fund manager who made his name at Invesco Perpetual before setting up his own fund management company Woodford Funds


The latest fund, Patient Capital is a £900m investment trust


One of its first investments was Sphere Medical PLC.


A £25 million AIM listed company.

Time will tell on the investment performance of The Woodford Patient Capital Trust.

UK HM Government May 2015 borrowings…

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In May 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office ( to raise cash for HM Treasury :-

27-May-2015 1/8% Index-linked Treasury Gilt 2058 £745.3830 Million
21-May-2015 4¾% Treasury Gilt 2030 £1,750.00 Million
14-May-2015 2% Treasury Gilt 2020 £4,098.8140 Million

When you add the cash raised:-

∑(£745.3830 Million + £1,750.00 Milion + £4,098.8140 Million) =  £6,594.20 Million

£6,594.20 Million = £6.594 Billion

On another way of looking at it, is in the 31 days in May, HM Government borrowed:-

£212 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2030 & 2058. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…

Barclays PLC

The Annual Report makings interesting reading of Barclays PLC


The three largest shareholders are:-

Qatar Holding LLC 6.65%
BlackRock, Incc  5.02%
The Capital Group Companies Inc 4.96%

The balance sheet is large….

Total assets £1,357,906 Million. That is £1.357 Trillion. (about 89% of the UK GDP).
Cash and balances at central banks £39,695 Million (£39 Billion)
Customer accounts £427,704 million (£427 billion are deposits from customers)
Loans and advances to customers £427,767 million (£427 billion are loans to customers)
Trading portfolio assets £114,717 million (The banks trading assets from its day to day trading operations)
Derivative financial instruments £439,909 million (yes, £439 billion in derivatives)
What is incredible is the amount of derivatives on the balance sheet, larger than the actual deposits from customers. The assets of Barclays are nearly the size of the total annual output (89%) of UK GDP. Our banks are too big to fail.

The UK Housing Crisis.

The UK is suffering from massive house price inflation.

The total value of UK homes is worth £5.75 trillion. That is over 2.5 times UK GDP.

London homes aloneare worth £1.485bn, that is nearly 100% of annual UK GDP.

The reality is that their is more demand for housing than supply, which is driving up prices. Also with such low interest rates, the demand from buy to let investors means, houses are being bought by investors for rental income, this reducing the numbers of houses for sale.

Nigel Wilson, the CEO of Legal and General one of the largest UK asset management houses [] has written a very powerful artice in The Telegraph to explain the situation.


Until the UK builds more houses, the situation will not get better. This needs political will.

The Witan Pacific Investment Trust

The Witan Pacific Investment Trust is a £175m investment fund listed on the London Stock Exchange. Its aim is to provide shareholders with a portfolio of equity investments in the Asia Pacific region with the aim of outperforming the MSCI AC Asia Pacific Free Index


Three fund managers look after the portfolio:-
Aberdeen Asset Management 44.9%
Matthews 44.4%
GaveKal 10.7%

The largest holdings are:

Japan Tobacco 2.8%
Taiwan Semiconductor 2.2%
China Mobile 2.0%
Toyota Motor 1.8%
HSBC 1.7%
AIA 1.7%
Oversea-Chinese Banking Corp 1.7%
Singapore Tech Engineering 1.6%
Pigeon Corporation 1.4%
Samsung Electronics 1.4%

A dividend yield of 1.7%